How to balance the FY ’10 budget 101:
1) For the past 7 years the city perennially collects $40-80 million more than the budget projects. Come clean on the “real” revenue numbers – state aid is known, taxes are predictable to within 1% and while local revenues are slightly less predictable, they represent only 20% of the whole budget and are still fairly consistent from year to year. Based on historic numbers, the city should still collect at least $30 million more than they are currently projecting in the pro forma budget.
2) Amazingly, for the past 8 years the city has collected significantly more than projected, but then manages to generate a surplus of only a few million dollars. The only way to manage a $2 billion plus budget to a net “profit” of less than 1% every single year is to fudge the numbers with a significant amount of discretionary spending (unless you are Bernie Madoff and the numbers are not real to begin with). Hold the line on this discretionary spending and we save $25 million or curiously almost exactly the increase the city is forecasting on “Other Department Expenses”.
3) The city put $10 million in the budget last year as fuel costs surged. Oil prices are now at their lowest level in years. Not only should we save the $10 million, but lower prices should add another several million in savings to the budget.
4) The city reported that the hiring freeze has saved the city about $10 million.
That’s exactly half the $150 million shortfall right there-at least.
5) The city spends about $65 million on busing but it is apparent from recent articles in the local papers that significant opportunities exist to make busing more efficient. Assuming just a 15% savings cuts $10 million from the budget.
6) The city has projected a 12% increase in the cost of healthcare for next year. Ignoring the possibility that this number could be “slightly” exaggerated in the first place in order to extract concessions on meals taxes from the legislature, the Boston Municipal Research Bureau puts potential annual savings of switching to the state run Group Insurance Commission conservatively at roughly $25 million.
This additional savings of $35 million cuts the projected deficit to $40 million or almost exactly the deficit already projected last Spring when the city enacted the FY ’09 budget.
7) While a wage freeze would probably be a fair concession from the unions given global economic conditions, these are subject to legally binding contracts and should only be considered after retroactively cutting all the raises given to city elected officials and other non-union personnel within the past 2 fiscal years. Only then should the city look to cut collective bargaining agreements. However, rather than simply slashing equally across all the wage scales, cuts should be less severe at the low end (for example, those making under $50,000) and fully implemented at the upper end (those making more than $100,000). For example, no cuts for employees making under $50,000 and a 2% reduction of raises for every $1000 thereafter until raises are eliminated completely for those making more than $100,000. If the 80/20 rule holds here like it does in most other areas of economics, we are looking at a balanced budget by thus cutting another $40 million from the budget and the budget is balanced without a single layoff. The wage scale should be adjusted of course to generate this $40 million in savings.
BUDGET HISTORY – BUDGETS V. ACTUAL RESULTS
Dollar figures in millions of dollars
YEAR BUDGET ACTUAL DIFF BUDGET ACTUAL DIFF SURPLUS
2008 2,309 2,343 34 2,309 2,327 18 16
2007 2,142 2,202 60 2,142 2,187 45 15
2006 2,062 2,104 42 2,062 2,090 28 14
2005 1,924 1,980 56 1,924 1,972 48 8
2004 1,852 1,893 41 1,852 1,888 36 5
2003 1,784 1,863 79 1,784 1,861 76 3
2002 1,772 1,815 43 1,772 1,810 38 5
2001 1,691 1,730 39 1,691 1,721 30 9
2000 1,612 1,624 12 1,612 1,616 4 8